Financial advice protections must stay

CHOICE calls on all politicians to oppose removal of consumer protections

20 June 2014

CHOICE is calling on federal politicians to oppose all legislation and regulation that will wind back essential protections for consumers seeking financial advice.

Today, the Government announced that it will remove critical consumer protections known as the Future of Financial Advice, or FoFA, reforms. The Government is introducing regulation to wind back some of the most crucial reforms, to take effect from 1 July 2014.

“Conflicted and poor financial advice has cost consumers billions and in too many cases led to people losing their homes and life savings. This is why consumer protections were originally needed and exactly why they should not be removed,” says CHOICE Chief Executive Alan Kirkland.

“CHOICE has contacted all Federal Politicians asking them to oppose the wind back of financial advice protections. Now more than ever, consumers need professional financial advice to help them save for their retirement, not advice distorted by hidden fees and advisers pushing products that don’t meet their needs.”

“One of these consumers is Lyndi who was a victim of bad financial advice prior to the original FoFA legislation being implemented. Lyndi is working with CHOICE to call for more protection for consumers, not less.”

"Lyndi's story shows that the financial and emotional impact of bad financial advice can devastate whole families for many years."

“We are asking federal politicians to protect basic principles. Consumers must be able to feel confident that they are getting impartial financial advice they can trust.

“There are some nasty surprises for consumers in these regulations.

“The Government claims that it is improving the best interests obligation when in it is removing a professional duty for advisers. You don’t go to a doctor expecting them to follow a check-list of tasks; you expect them to use their professional judgment to find the best solution for you. It should be the same for financial advisers. Financial advisers should be required to act in a client’s best interests – full stop.

“And their advice should not be clouded by any type of financial incentive that reward them based on how much of a particular product they sell.

CHOICE is particularly alarmed that the Government is proposing to remove the requirement that clients ‘opt in’ to fees charged by financial advisers. One of the biggest problems in the investment industry has been clients being charged fees, for years after the adviser has stopped providing advice. The requirement that clients consent to these fees every two years is an important way to make sure that investment income is not eroded by fees.